The Reserve Bank of India has been selling gold from its reserves for the first time in a long while. Since the beginning of July, the start of the central bank's business year, it bought gold worth $5.1 billion and sold about $1.15 billion of the yellow metal, according to RBI's weekly statistical supplement data. The value of gold in the country's forex reserves amounted to $26.7 billion on October 11.

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The total amount of gold with RBI at the end of August was 19.87 million troy ounces, according to the latest data. This was about the time that the central bank accepted the Bimal Jalan committee report on its capital framework. The committee recommended that, after providing for various risk buffers, which could be 5.5 to 6.5 percent of the RBI's balance sheet, the entire realised surplus can be transferred to the government.

The central bank appears to have started trading in gold more actively since adopting the report, going by the data. The Jalan committee was set up last year in the wake of the debate over sharing the RBI's surplus income with the government to fund its deficit.

Analysts said the stock of gold in forex reserves has traditionally been revalued only once a month. Any changes in the interim weeks could be attributed to the purchase or sale of gold. But some former officials don't rule out the possibility that RBI has changed the gold value reporting format. The RBI didn't respond to queries. It doesn't disclose the volume of gold in its vaults as frequently as it discloses its value.

Central banks globally are diversifying foreign exchange reserves by holding some portion of this in the form of gold. India has been buying gold sporadically since November 2017 and has acquired close to 2 million troy ounces since then. While most of this is purchased from the open market, some of it also comprises smuggled gold confiscated by the customs authorities from time to time.

Sources close to the RBI said it's likely that the central bank has sold some of the gold it has bought recently. It's likely that the RBI is trading in gold as a part of treasury operations, the way it trades in currencies, they said.

Back in 1991 the RBI had been forced to pledge 67 tonnes of gold to Union Bank of Switzerland and the Bank of England to head off a balance-of-payments crisis when the country had barely enough reserves to fund a few weeks of imports.
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